(₿): Bitcoin in 2019 vs. 2020
Newsletter #26: 20200104 - 20200110
Hello beautiful, hope you’ve enjoyed your holidays - it’s min a while. Here’s what I’ve seen in Bitcoin this week.
If you’ve found the newsletter helpful, hit the ❤ above and share w/ your dog.
Last Week’s Most Read:
🎱 “It is time to face this potentially uncomfortable reality: cryptocurrency is most useful when breaking laws and social constructs.” Jill Carlson publishes an op-ed on why cryptocurrency won’t go mainstream. Further reading: Eric Voskuil on Bitcoin as Black Market Money.
Older Newsletters: 25, 24, 23, 22, 21, 20, 19, 18, 17, 16, 15, 14
Bitcoin Markets
Stats
XBT: $8080
Market Cap: $146 B
Dominance: 73.42%
Hashrate: 106.78 EH/s (ATH)
Difficulty: 13.8 T (ATH)
Block Height: 612,244
Halvening: T-123 Days
Fiat Market Cap: #37
Sources: Messari , BTC , BitcoinBlockHalf , FiatMarketCap
Bitcoin / Lightning Tech
💡 In addition to his Bitcoin and Colin Harper’s Lightning 2019-year-in-review series, Aaron van Wirdum of Bitcoin Magazine highlights upcoming Bitcoin protocol upgrades in 2020, including:
Schnorr/Taproot/Tapscript for improving transaction fees (estimated 30-75% fee-savings), block validation speed (estimated 2.5x faster), fungibility and privacy of bitcoins, and scripting techniques
The Great Consensus Cleanup for removing edge case vulnerabilities
The NOINPUT Class for helping Lightning scale
OP_CHECKTEMPLATEVERIFY, aka: OP_SECURETHEBAG, for smoothing out network congestion and fees
Drivechains for extending Bitcoin’s functionality via sidechains, while being secured by Bitcoin’s miners instead of a federated authority
🛠 For those of you who are looking for even more technical content, look no further than Bitcoin Optech’s 2019-year-in-review. In it, you’ll find a summary of major releases of popular infrastructure projects, notable technical conferences, field reports, new open source infrastructure solutions, build systems and security, vulnerabilities, BIPs, and more. By reading through it, you’ll be up to date on the bleeding edge of Bitcoin development and help shape its future.
💰 Mauricio Di Bartolomeo of Bitcoin Magazine explains why Proof of Reserves is critical for Bitcoin businesses to earn customer trust, and the challenges ahead for its adoption.
Bitcoin Companies / Projects
Wallets
🕵️♂️ Lightning Labs is looking for a front-end React developer.
Merchants
📈 Keeping afloat on its community and grants, BTCPay surpassed 100,000 downloads in 2019 and in 2020 looks to implement new features like support for Blockstream’s Liquid network, hardware wallet support, enhanced automation, and more. The open source community recently founded the BTCPay Foundation to attract more corporate sponsors to fund ongoing development.
Exchanges
Funds + Asset Managers
💳 BlockFi has just added support for USDC and Litecoin for its interest-earning product, and will focus on a mobile app, fiat on/off ramps, and a bitcoin rewards credit card this year.
📝 Bitcoin miners are inherently short difficulty and need ways to hedge against difficulty increases to enhance their bottom lines. GSR has partnered with Canaan-backed Interhash to launch new derivatives next month to help fill the gap, including a new type of futures contract that trades based on hashrate. It’s the hope that with financial products like these, the market matures and becomes more efficient and less volatile.
Custody
Miners
📉 Bitfarms, one of Canada’s largest bitcoin mining companies that controls nearly 1% of the network hash rate, will need to boost its operating cash flow to pay off its high interest $20 M loan. 2020 could be the make or break year for the company.
💔 Though the two are still collaborating across other mining sites, DMG Blockchain has pulled its partnership with Bitmain RE: the 300MW Texas mining farm due to their inability to materialize cost and operational efficiencies. It’s unclear whether Bitmain will hire another operator or run the Texas operation itself.
🤝 On the other hand, Japanese corporate giants SBI Holdings and GMO will be renting mining capacity at the Northern Bitcoin / Whinstone 1-gigawatt mining farm in Texas.
Other
Bitcoin Insights
Reports
📊 John Dantoni of The Block breaks down 2019 crypto/blockchain-related investment deals, highlighting how >50% of deal value came from North America.
💸 Frank Chaparro of The Block notes how since February 2018, crypto trading spreads have plunged 90%, due to more liquid markets and enabling tech that helped lower the cost of risk. The trend has led several desks to shutter operations or change their business models.
📊 Fidelity Digital Assets published a 2019 retrospective on the investment and usage of the Bitcoin network. They reference KPIs like futures volumes at the CME & Bakkt, Square’s gross BTC sales, transaction volumes, Segwit adoption, and more.
Theses
🚨 Matteo Leibowitz of The Block breaks down the bearish security implications of the upcoming Bitcoin block reward halvening. Though Bitcoin’s security ratio (miner revenue vs. network value) will halve at block 630,000, he believes that speculative attacks won’t happen in the short term due to:
Insufficient liquidity in the lending, futures, and options markets
Constraints on obtaining enough hashpower
Ignorance of fundamentals-driven events in the crypto markets
“The only natural solution to Bitcoin’s deteriorating Security Ratio is the rapid emergence of a healthy fee market… At existing fee revenue levels, this would require a 4300% increase in fees per block.”
🛰 What good is Bitcoin if the Internet fails? Neil Woodfine of Blockstream breaks it down.
Podcasts
Bitcoin Regulations / Compliance
🕵️♂️ The SEC’s Office of Compliance Inspections and Examinations (OCIE) looks to address investment suitability, trading practices, fund safety, pricing, and the effectiveness of compliance programs in 2020. In addition to these investor protection measures, OCIE will also scrutinize intermediaries of securities transactions regardless of whether they are blockchain-based services - 👀 DeFi.
🛑 Former Bakkt CEO / newly appointed US Senator, Kelly Loeffler, recently joined the Senate Agricultural Committee, which oversees the CFTC. Intercontinental Exchange and its subsidiary Bakkt are regulated by the CFTC and has speculators worrying about a conflict of interest. Frankly, I’m just surprised to see how we’ve got to this point in 11 years.
🇺🇸 US-based crypto exchange Kraken says its compliance costs are increasing, as it received more law enforcement inquiries in 2019 than ever before. The US agency with the most inquiries was the FBI, followed by the DEA, HSI, ICE, and the SEC. The exchange says that US-based compliance costs are quickly becoming a barrier to entry for other crypto businesses.
🇳🇱 But the US isn’t the only jurisdiction with increasing compliance costs. Netherlands-based derivatives exchange Deribit is moving its operating entity to Panama, in order to avoid compliance with the EU’s Fifth Anti-Money Laundering Directive (5AMLD).
🇶🇦 And some jurisdictions are outright banning crypto trading, custody, and financial services, like Qatar.
Bitcoin Calendar
Lightning Meetup w/ Elizabeth Stark | Zürich | Jan 13
CME Options Launch | Jan 13
Advancing Bitcoin Conference 2020 | London | Feb 6, 7
Bitfinex Options Launch | Q1
MIT Bitcoin Expo | Cambridge | Mar 7, 8
Bitcoin 2020 | San Francisco | Mar 27, 28
BitBlockBoom | Dallas | Aug 29, 30
Tweet at me if I’ve missed anything or if you’ve got feedback, questions, and comments.
This is not financial advice. Do your own research.
Newsletter #1 was published on 20190621. Stats:
XBT = ~$10,200
Market Cap = ~$180 B
Dominance = ~61.6%
Hashrate = ~60 EH/s
Difficulty = ~7.93 T